Auction Info
How Home Selling Auctions Work
Real estate auctions are similar to regular auctions but do have key differences. Typically, they're for sellers who want to sell quickly and are willing to accept a lower sale price in exchange. To determine your home's market value, your property is reviewed either through a regular appraisal, competitive market analysis, and/or country tax value. Once this value is established, you and the auctioneer discuss and agree on a price you believe will attract a buyer. Then, you both determine the type of auction best fits your needs. There are several types of real estate auctions, including absolute, ballroom, bidder's choice, caravan, foreclosure, minimum bid or sealed bid auctions, or an auction with reserve.
Benefits of Home Selling Auctions
The biggest plus of home selling auctions is it gives you the best chance to sell your property quickly. The auction itself is easily marketed and gathers numerous interested buyers in one place at one time. Although timelines vary, most auctioneers can promote and auction off your property between 30 - 45 days of contracting with you. Closing or settlement is also fast, typically within another 30 - 45 days. This is usually much quicker than listing with an agent and waiting for offers, which means you get out of paying insurance, property taxes, and upkeep costs sooner.
You also have more control, because a home selling at auction is sold as-is with few or no contingencies attached to the sale. You set the terms of sale, not the buyer. This also means there's little or no home staging, and typically you won't make any cosmetic or structural changes to your property. Prospective homebuyers are responsible for ordering inspections prior to the sale and fully expect necessary upgrades and/or repairs. This could definitely work to your advantage if your home needs high-dollar repairs you don't want to invest in before you can sell it.
"The Bad" of Home Selling Auctions
On the downside, even with a bidding war, there's no guarantee you'll get as good a price as you would have on the open market. Realistically, properties often sell as much as 40% below market value, because home buyers or investors are looking to buy a bargain. Again, you can set a reserve to protect against underselling, but if it's too high, people may not bid at all and your auctioneer isn't going to agree to an amount he feels is too high.
One of the biggest drawbacks is you might get stuck with an unfavorable sale price. If you truly want your home sold, you may agree to accept the highest bid, even if it's much lower than your home's value. While this attracts the most bidders, you could be setting yourself up to be low-balled.
The costs associated with a home selling auction are another drawback. Real estate auctions come with their own set fees and it's not always cheaper than using a real estate agent with a traditional marketing plan. You pay the auctioneer's commission, and advertising, administrative and legal costs. Plus, if you're home doesn't sell, you're still stuck with a majority of the costs.
Should you decide to sell your home at auction, find a reputable auctioneer with a current state license. Also, ensure they're experienced at auctioning real estate and don't just usually handle personal belongings. Compare fees versus experience and ask for references.